Can Traders Count on Coffee Stocks for Growth?
Consumers count on coffee for a quick morning (or afternoon) pick me up. Investors have been counting on coffee stocks like Starbucks (SBUX), Peet’s Coffee & Tea (PEET) and Green Mountain Coffee Roasters (GMCR) to provide growth to their stock portfolios.
So what’s in the market for coffee stocks for short term traders?
Of the three coffee stocks in today’s report, all are pulling back from significant longer-term highs. But the pullback in one has been severe enough to send the stock into bear market territory where any near-term strength is as likely (or more so) to be sold as to be bought.
Let’s take a look at the stocks.
Shares of Starbucks had closed lower for three out of the previous four sessions heading into Friday’s session, during which the stock was up a fraction. The stock also had been upgraded to the upper end of our “neutral” ratings” as of Thursday’s close, pulling back to oversold territory where buyers have historically returned to the stock.
Note similar pullbacks with similar upgrades to 7 out of 10 in SBUX both in early November and early October. SBUX gained more than 3% the day after being upgraded to 7, and was higher by 13% five days later. After the stock’s November upgrade to 7 out of 10, SBUX was again positive in one-day and one-week timeframes.
On the opposite end of the spectrum are shares of Green Mountain Coffee Roasters, which dropped into bear market territory in mid-October, one month after rallying to new, 52-week highs. Down more than 2% ahead of trading on Monday, GMCR has closed lower for two days in a row. Earning a 3 out of 10 rating, GMCR is among our list of “consider avoiding stocks” ahead of Monday’s session.
What are traders to make of the orderly retreat from 52-week highs in Peet’s Coffee and Tea? Down more than 12% from those annual highs, PEET is actually less oversold heading into trading on Monday than it was a week ago, when prices were higher. The stock has a neutral trading as of Friday’s close, but could experience upgrades if volatility increases and the selling in the stock becomes a little less well-mannered.
All of the stocks in today’s report were available from research and data available through PowerRatings. To learn more, click here
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David Penn is Editor in Chief of TradingMarkets.com